SMEs – Restructuring of Loans through BNM’s SDRS
On 25.3.2020, Bank Negara Malaysia (“BNM”) announced that banking institutions will offer a moratorium on loan / financing repayments for a period of 6 months commencing from 1.4.2020. This offer is, however, only relevant to the small and medium enterprises (“SMEs”) if their loans and financing facilities are performing as at 1.4.2020. More details of this new measure can be found in our earlier article entitled “Key Takeaway on the Moratorium of Loan Repayment” which can be viewed at KSSH’s Article on the Moratorium.
On 27.3.2020, BNM announced additional measures to support the SMEs by increasing the allocation of the existing financing facilities under the BNM’s Funds to RM13.1 billion. This is aimed to provide assistance to more SMEs in sustaining their business operations during this unprecedented time with Covid-19 outbreak. The BNM’s announcement and FAQs can be viewed at BNM’s Announcement and BNM’s FAQ for Covid-19.
Despite the various good efforts initiated by BNM and our government, businesses have suffered greatly under the Movement Control Order (“MCO”). The working capitals, cashflows, costs and et cetera of the SMEs will continue to be affected even after the MCO period.
As a counter measurement, most businesses would and should try their level best to improve their financial performance, overcome their internal constraints and reach out to various stakeholders for support and assistance.
Small Debt Resolution Scheme (“SDRS”)
Another option for the SMEs to consider is to seek assistance under the SDRS. It is a scheme established by BNM to support viable SMEs businesses facing difficulties by facilitating rescheduling or restructuring of their financing facilities, and where appropriate, providing new financing to the eligible SMEs.
Under the SDRS, BNM acts as the Secretariat for a Small Debt Resolution Committee (“SDRC”) with the participation of various financial institutions (“PFIs”), including all the banks licensed under the Financial Services Act 2013 and the Islamic Financial Services Act 2013 as well as all development financial institutions prescribed under the Development Financial Institutions Act 2002.
Who is eligible?
To be admitted under the SDRS, SMEs must fulfil the following conditions:
a) Malaysian-owned (at least 51%) companies and institutions registered under the Companies Act 2016 (formerly Companies Act 1965), the Registration of Business Act 1956, the Societies Act 1966 or the Cooperative Societies Act 1993;
b) SMEs with on-going business and annual sales turnover not exceeding RM50 million or number of full-time employees not exceeding 200; and
c) SMEs having difficulties with financing from more than 1 financial institution.
How does it work?
The Application Form for SDRS (or SDRS-1 Form) may be obtained from the PFIs, BNMLINK / BNM Offices, BNM website: www.bnm.gov.my or SMEinfo portal: www.smeinfo.com.my. The duly completed form must be submitted to the relevant PFIs or the Secretariat (who will in turn pass it on to the relevant PFIs).
Generally, if the information and documents submitted are complete, the relevant PFIs have 21 days to evaluate the application and revert with their respective decision to either approve or reject the application.
If the application is approved, the new financing, rescheduling or restructuring terms will be implemented by the PFIs and the SME.
If the application is rejected, the Secretariat and the SDRC will conduct an independent evaluation and it may either agree with or make changes to the decision of the PFIs.
All PFIs would usually suspend all legal proceedings from the date of receipt of the application until SDRC agrees with their decision to reject the application or the applicant commits a default under the new rescheduling or restructuring arrangement.
In this regard and since the approval rate of the applications made under the SDRS is reportedly high, eligible SMEs should consider this option as a holistic solution to resolve their financing problem efficiently.
Lau Kee Sern
Andy Lim Yong Hong
Messrs Kee Sern, Siu & Huey
2nd Floor, Block C, Rivercity Jalan Sultan Azlan Shah (Formerly Jalan Ipoh)
51200 Kuala Lumpur
Tel: +60(3) 9212 2688
Fax: +60(3) 4044 0448
All rights reserved. The contents of this publication, current at the date of publication set out above, are for reference purposes only. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication. Your specific circumstances should always be sought separately before taking any action based on this publication.